Orion Office REIT (US:ONL)2023-05-10 19:10Financial Data and Key Metrics Changes - Core funds from operations for the quarter were $25.3 million or $0.45 per share, down from $29.3 million or $0.52 per share in Q1 2022 [12] - Adjusted EBITDA was $31.2 million compared to $34.7 million in the same quarter of 2022 [12] - Total revenue for the quarter was $50.2 million, down from $53.2 million in the same quarter of the prior year [30] - The net loss attributable to common stockholders was $8.9 million or $0.16 per share, compared to a net loss of $9.9 million or $0.17 per share in 2022 [30] - General and administrative expenses were $4.3 million compared to $3.5 million in Q1 2022 [12] Business Line Data and Key Metrics Changes - The company signed four leases for 83,000 square feet in the first quarter [26] - Renewed a 64,000 square foot lease with the U.S. government for 15 years [26] - Leasing spreads during the first quarter were about 20%, with variability expected [9] Market Data and Key Metrics Changes - As of March 31, 2023, 73.6% of annualized base rent was from investment-grade tenants, up from 67% a year earlier [7] - The largest tenant industries are healthcare and government, representing 13.5% and 12.5% of annualized base rent, respectively [7] - Over 30% of annualized base rent is derived from Sunbelt markets [7] Company Strategy and Development Direction - The company is focused on stabilizing and repositioning its portfolio while avoiding over-leverage [23][24] - Plans to dispose of non-core vacant assets to maximize long-term value [11][27] - The strategy includes maintaining significant liquidity and operating on a low leverage basis [14][40] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenging economic backdrop for real estate, particularly for office spaces, but remains confident in the long-term strategy [23] - There is an expectation of sequential reductions in quarterly earnings and core FFO due to scheduled lease vacancies [33] - Management is optimistic about the potential for a sustained return to office work as corporate attitudes shift [25] Other Important Information - The company ended the quarter with $557.3 million of outstanding debt and no borrowings on the revolving credit facility [13] - Total liquidity was $449.5 million, consisting of $425 million available on the revolving credit facility and $24.5 million in cash [40] - A quarterly cash dividend of $0.10 per share was declared for Q2 2023 [41] Q&A Session Summary Question: How has leasing transpired since going public? - Management indicated that leasing has been largely in line with expectations, but attracting new tenants to vacant properties has been slower than anticipated [42] Question: Can you elaborate on the improvement in asset pricing? - Management noted that cap rates are widening for well-leased properties, indicating a shift in the market dynamics [43] Question: Will acquisitions be considered before determining the status of the term loan? - Management stated that they have the capacity to add assets if they choose to, but have not made any acquisitions since going public due to cautious market conditions [45]